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The US Stimulus Package – Fiscal Policies

In the last post, you read about the monetary policies in the US stimulus package. If you have not read the post, we urge you to check it out before you read ahead. Since our last post, the number of COVID-19 cases in the US increased to around half a million. The US government has taken several steps through the stimulus package to help the country in these harsh times. Let’s focus on the US Stimulus Package – Fiscal Policies in this post.

The US Fiscal Policies

Fiscal policies relate to government spending and taxation policies. They are the changes made to the budget to influence the economy. Let’s go over the fiscal policies in chronological order:

  1. 6 March 2020: President Trump signed a spending bill called “Phase One” of stimulus efforts, of $8.3 billion to fund efforts to fight the pandemic. Furthermore, this bill includes funding for:
    • Research on a vaccine
    • State and local government to fight the virus
    • Help with overseas efforts to stop the virus
  2. 13 March 2020: The Democratic-controlled House of Representatives passed a stimulus bill called “Phase Two” of stimulus efforts. Additionally, this bill includes funding for:
    • Free virus testing
    • Increased funds for Medicaid
    • Expanded unemployment benefits
    • Provision for paid sick leave for some worker affected by COVID-19
    • Along with this, President Trump declared a state of emergency allowing the Federal Government to distribute up to $50 billion in aid.
  3. 17 March 2020: Multiple events took place today:
    • Steven Mnuchin, the Secretary of Treasury announced that businesses and individuals will have an extra 90 days past April 15 to pay their tax bills. This measure hopes to provide extra liquidity of up to $300 billion. However, the filing of tax return forms is still due on April 15.
    • Moreover, Secretary Mnuchin and President Trump suggested a $1 trillion stimulus package, called Phase Three to the Republican-controlled Senate.
    • Democratic leadership in the House of Representatives revised the paid sick leave proposal.
  4.  18 March 2020: The Senate Republicans approved the Phase Two stimulus package passed earlier on 13th March by the House.
  5. 19 March 2020: Senate Majority Leader Mitch McConnell released a draft bill of the “Phase Three” stimulus package. This is the plan proposed by Republicans, which you can read here.
  6. 20 March 2020: The U.S. Secretary of Education, Betsy Devos made an announcement regarding the student loans. She said “all borrowers with federally held student loans will automatically have their interest rates set to 0% for at least 60 days. In addition, each of these borrowers will have the option to suspend their payments for at least two months”. Borrowers can reach out to their student loan providers for the suspension of payments for 60 days. People who are more than 31 days behind on their payments as of 13th March will receive an automatic suspension.
  7. 23 March 2020: Speaker of the House, Nancy Pelosi released the “Phase Three” stimulus package bill by the Democratic-controlled House. You can read the draft here.
  8. 25 March 2020: Congress supposedly reached a deal on the Phase 3 stimulus package. Later on the same day, the Senate unanimously passed a $2 trillion stimulus bill called the CARES act. You can read details here, and the extensive highlights are:
    • $301 billion for a $1,200 tax credit per adult and an additional $500 for each child for people making below $75,000. The amount will be lower for people earning between $75,000 to $99,000 and none for earnings over $100,000 a year.
    • $250 billion to expand unemployment insurance and cover gig and freelance workers.  Also includes $600 a week for 4 months for workers unemployed due to COVID-19
    • $500 billion to government lending program to lend to companies impacted by the crisis. There is a possibility of the government taking equity stakes in the companies receiving the loan. These companies will have a few restrictions such as no stock buyback, no dividends, and no layoffs. These loans will have greater oversight. They will be overseen by an inspector general and a congressional panel. Every loan will be public and documented. This program also includes $17 billion for companies deemed essential for national security like Boeing. This also includes $29 billion for airlines.
    • $367 billion for loans to small businesses with repayment deferred for 6 months to a year. Also, the business does not have to pay back the amount spent on rent, utilities, and payroll. Loans are capped at $10 million per company and $100,000 in payroll per employee.
    • $221 billion for business tax cuts. This allows businesses to defer payroll taxes until the end of the year. It also allows businesses to claim deductions for current losses against past profits to claim refunds.
    • $32 billion for cash grants to cover wages for airline employees. Airlines who claim this grant cannot issue dividends or buyback stocks. In addition, they cannot make pay cuts till September and executive pay will also be capped.
    • $349 billion in aid to  small businesses as grants and loans
    • $150 billion to state and local governments
    • $130 billion for healthcare providers and hospitals
    • $25 billion to cover lost revenue of public transit
    • $48 billion for agriculture programs
    • $10 billion to cover losses for the postal services
    • $27 billion to fund coronavirus research for drugs and vaccines
    • Student loan payments will be suspended till 30 September without interest
    • Early withdrawal penalties for 401(k) will be waived off up to $100,000
    • Banks will be granted more flexibility to manage borrowers who are falling behind on payments on consumer loans.
    • Owners of multifamily properties with federally backed mortgages will get a forbearance for 90 days. This is on a condition that they do not evict tenants for nonpayment.
    • The bill extends repayment time to repay bankruptcy debt from 5 to 7 years. It also ensures that people do not have to use their stimulus checks to pay debts.
    • Companies that service federally backed mortgages will be mandated to grant forbearance of up to 360 days. They also cannot start or process foreclosure or evictions for a 60 day period.
    • The bill requires banks to hold more capital. It also allows controllers of currency to allow banks to make larger loans. Banks with under $10 billion in assets will have a higher maximum leverage ratio.
  9. 27 March 2020: President Trump signed the fore-mentioned bill into law after few hurdles.
  10. 31 March 2020: Both President Trump and House Speaker Nancy Pelosi indicate they want to pass a Phase 4 stimulus package. The details are still not clear.
Summing Up

The US stimulus package – both fiscal and monetary policies, is striving to minimize the impact of COVID-19. Many suggest that these extensive trillion-dollar packages are not acting as a stimulus to growth. Instead, they should be thought of as social insurance. Social Insurance to prevent mass homelessness, starvation, and a wave of business closures. They will probably have to launch another package to ensure the economy can come out of this crisis. Additionally, another package after the crisis to stimulate growth and spending to recover from this. The best hope is to contain the virus and flatten the curve.
Moreover, feel free to reach us at advisors@kristal.ai or through our Contact Us page. Stay tuned to Tracking Covid-19! In our next post, we will have a roundtable discussion with our partner firms for their views on the crisis.


The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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